ANADIGICS, Inc. Q1 2010 Earnings Call Transcript

Apr.26.10 | About: ANADIGICS, Inc. (ANAD)

ANADIGICS, Inc. (NASDAQ:ANAD)

Q1 2010 Earnings Call Transcript

April 26, 2010 5:00 pm ET

Executives

Tom Shields – EVP & CFO

Mario Rivas – President & CEO

Analysts

Anthony Stoss – Craig-Hallum

Patrick Newton – Stifel Nicolaus

Steve Ferranti – Stephens, Inc.

Aalok Shah – D.A. Davidson

Todd Koffman – Raymond James

Mike Alexander – Charter Equity

Cameron White [ph] – Jay A. Fishman Limited

Richard Shannon – Northland Securities

Mike Burton – FBN Securities

Shashi Rao – Credit Suisse

Operator

Good afternoon. My name is Marcellavan [ph] I will be your conference operator today. At this time I would like to welcome everyone to the ANADIGICS first quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator instructions) Thank you.

I will now turn the call over to Mr. Tom Shields, Chief Financial Officer. Sir, you may begin your conference.

Tom Shields

Thank you, operator. Good evening, everyone, and welcome to the ANADIGICS First Quarter 2010 Earnings Conference Call. Before we get started, please remember any comments made in this call by management as part of prepared remarks or in response to your questions may contain forward-looking information. Such information is subject to risks and uncertainties as described in this evening's press release and in the Company's various filings with the SEC.

I would now like to turn the call over to Mario for his opening comments.

Mario Rivas

Thank you, Tom and good evening everyone. I’m very pleased to report our revenue of 43.5 million in the first quarter of 2010 marks our fourth consecutive quarter of revenue growth. Revenue grew 4% over to prior quarter, 43% year-over-year and surpassed our expectations of being flat sequentially.

Our growth in the first quarter comes as a result of 22% sequential growth in our wireless product line at the high level of handset design wins secured in the second half of 2009 that continued to move into production.

Our customer relationships are stronger than ever, with the return of Samsung to our top 10% customer list, joining RIM, LG and our Asia Pacific distributor, World Peace Group. These customers continue to play a key role in our revenue expansion as we won designs at all of our major existing customers during Q1.

The strong growth momentum we have achieved over this past several quarters is a direct result of the successful execution of our 2009 business initiatives and outlines the trajectory anticipated for 2010. We are expecting continued double-digit revenue growth in wireless in the second quarter and are anticipating achieving another key financial milestone for the company – the profit and non-GAAP net income equivalent to break even EPS for the quarter. Just a few quarters ahead of most expectations.

The core drivers of ANADIGICS continue growth are strength in the growing 3G and 4G wireless markets, which is being further fueled by our top customers gaining market share in the respective market as well as the increasing power amplifier content in 3G handset.

We expect this favorable market trends to continue as we further capitalize on the increasing design win opportunities that leverage ANADIGICS best-in-class, InGap-Plus BiFET technology.

Order trends in wireless for our HELP3 power amplifiers were particularly stronger in the quarter with high attach rate across multiple customers. We continue to see a transition to our HELP3 plus coupler products, which not only simplify RF design for many popular 3G chipset but are also differentiated by their high linearity and power efficiency.

Also during the quarter we had a better than expected growth in WiMAX, dual band wideband CDMA and our cable business. Specifically, our cable business benefited from recent infrastructure build out in developing countries which we expect to be consistent for the rest of the year. Additionally, we are gaining market share in the China market with some of the leading handset suppliers in TD-SCDMA.

I now like to give an update on our 2010 initiatives which are continuing to leverage our operational excellence, introduction of superior products win business over our competitors, capitalizing on the growth of 3G and 4G markets. And as a result, achieving profitability.

Starting with operational excellence, we continue to focus on maintaining operational excellence as we scale to higher levels of production. Our fab cycle times are consistently averaging less than 30 days with yield in the mid-90s.

We are also continuing to build our high manufacturing strategy with win semiconductors as part of our commitment to be prepared for large scale growth in the future.

Let’s talk about our new products, which are the key drivers of our growth. We exited 2009 with unprecedented pipeline of new products. I’m pleased to report that during the first quarter of 2010 we released seven new products across several product families, including dual band PA, HELP3 plus coppers and HELP4.

In February, we announced a latest version of our very successful dual band CDMA power amplifiers which have thrown a lot of customer interest and in March, we announced our new HELP4 power amplifier which is the industry most efficient power amplifiers for the 4G LTE and 3G HSPA plus mobile market.

We continue to focus on advancing ANADIGICS leadership position in the LTE market and we are actively sampling parts with customers in order to position ourselves for the larger scale roll out next year.

Turning to profitability, as stated earlier, getting to profitability is a critical milestone for the company. For the second quarter, we are expecting a profit in non-GAAP net income equivalent to break even EPS for the quarter, which is a few quarters ahead of most expectations. Our wireless growth is anticipated to be approximately 20% in Q2, demonstrating traction and market share gains.

With that I will turn the call over to Tom to discuss our first quarter financial results in more detail.

Tom Shields

Thank you, Mario. As a financial summary on a non-GAAP basis for the first quarter of 2010, we reported the following

Total revenue net sales were 43.5 million and increased 4.1% sequentially compared with our prior financial guidance of being flat sequentially.

As Mario mentioned, the revenue increase resulted from stronger demand of a wireless 3G products, particularly, wideband CDMA, whereas our wireless product net sales increased 26%, exceeding our previously anticipated net sales increase of 20% sequentially. We came out of the first quarter feeling very pleased in light of the industry’s seasonal softness that typically occurs during the first quarter.

The breakdown in the net sales of the reported 43.5 million for the first quarter consisted a wireless at 30.4 million and broadband at 13.1 million. Broadband decreased sequentially 26% on a previously reported and expect to decrease of wireless LAN product shipments.

Wireless LAN net sales were $800,000 and decreased 4.9 million sequentially. Excluding wireless LAN net sales from both Q4 2009 and Q1 2010 total company reported net sales. Broadband actually increased 3.3% sequentially on stronger WiMAX product shipments.

WiMAX net sales were 2.6 million and increased 24% sequentially. CATV net sales were 9.6 million and decreased 3% sequentially. In CATV, cable infrastructure net sales rose 1.5 million, partially offsetting a 1.8 million decline in cable set-up box net sales.

Gross profit was 32.3% of total net sales and increased sequentially 320 basis points. This topped our previously anticipated gross profit of between 29% to 30% net sales guided for the first quarter. The increase in gross profit stands primarily from better overall product mix and associated product margins on the reported net sales.

Fab utilization was slightly ahead of our fourth quarter and was in the high 50s. Operating expenses were $16.8 million and came in over our initial target because we provided for increased investments in R&D to take advantage of a significant improvement in customer design opportunities in wireless. R&D expense increased 700,000 and SG&A increased $600,000 in the first quarter.

Earnings loss per share was $0.04 compared to our prior financial guidance of a loss of $0.05 to $0.06 per share, the better financial performance results from an increased net sales and a significant expansion in gross profit in the first quarter.

Our cash balance at April 3, was 90.4 million and we use 2.1 million in the first quarter, principally to fund accounts receivable on the increased net sales in the quarter. Depreciation was $4.7 million and capital expenditures were $0.8 million.

Looking ahead into the second quarter of 2010, we’re currently fully booked to a 12% sequential increase in net sales for the second quarter of 2010. The net sales increase reflects an anticipated 20% sequential growth in our wireless product net sales; again, this is coming on the strength of an in-demand our 3G wideband CDMA products as experienced in the first quarter.

We are targeting gross profit of 35% on net sales and anticipated growth of 270 basis points sequentially. Operating expenses are expected to increase up to a 0.5 million to 17.3 million, all-in related R&D investments. We therefore are very pleased to be targeting a non-GAAP profit for the second quarter 2010 which rounds to a break even non-accruing-GAAP earnings per share.

Operator, I would like now to open the line for Q&A. Thank you.

Question-and-Answer Session

Operator

(Operator instructions) Our first question is from the line of Anthony Stoss with Craig-Hallum. Please go ahead with your question.

Anthony Stoss – Craig-Hallum

Hey, guys, great job. Great guide. Could you take us through design activity? Mario it sounds you talked about it being strong and increase in R&D. Can you give us a sense or maybe a little bit more detail and I have a follow-up? Thanks.

Mario Rivas

Yes, we have introduced basically three families of products that are driving our design wins. Just to quickly give you an overview is that the HELP3 plus couplers that are pad compatible, but it’s a different customers of different choices of integrating the coupler or not, as well as dual band devices that are being very, very popular. Going forward, the work is on the LTE side of the house, and obviously we’re sampling now for mass production in 2011 are we expecting infrastructure on devices to be available.

Anthony Stoss – Craig-Hallum

Okay. Along that same thing, Mario, and maybe you don’t have this on your finger tips, maybe nice to know you talked about your product launches in Q1, what percent of your total revenue duals new products make up? And also any thoughts on kind of number of new products for Q2?

Mario Rivas

We are still in track, we said that in fourth quarter of this year new products will account from between 40% and 50% of our revenue. And I am still standing by that number. Obviously in Q1, that is not the case, it’s just smaller amount and it will increase in every quarter through 2010.

And on the number of designs, the biggest family that we’re going to introduce it will be the LTE family in multiple bands. There is a proliferation of bands on LTE. I would give priority to the most common bands, one, two, five, eight to give you some examples, but there is band 13, for a particular operator in North America that is required and several others. It’s a large number of units. In Q2, I will foresee that a number of new product introductions will be smaller only because we’re going to be concentrated on sampling the future devices for LTE. So we will be sampling to customers but not make an official introduction yet.

Anthony Stoss – Craig-Hallum

Okay, last, two part, and then I will jump back in the queue. Any component restraints you see in the Horizon that would limit your execution and also if you won’t mind talking about the current pricing environment?

Mario Rivas

Not at a moment. We deducted some lengthening on orders. There is a ten week cycle on different component that we need, but in anticipation of that we did spend a little bit of money to put it on inventory. So we don’t have any severe issue of any kind. On the pricing environment we continue to model, the same thing we said, and 8% to 10% a year. It’s too early to tell you what’s going to happen on the second half, but I see that the entire industry it seems to be going strong and I expect that everybody is trying to add capacity at the moment which should be positive right.

Anthony Stoss – Craig-Hallum

Great, thanks a lot, guys.

Operator

Our next question is from the line of Patrick Newton with Stifel Nicolaus. Please go ahead with your question.

Patrick Newton – Stifel Nicolaus

Hey, thank you for taking my question. I was wondering if you guys could update us on your qualification process of when and is there any change this time frame and then also once qualified what exactly is your outsource strategy, do you have a certain revenue internal utilization threshold before you start outsourcing or you perhaps at the minimum level that you always going to run through when?

Mario Rivas

At the moment, we have concentrated, as I stated before on running test vehicles and creating good models that there are fundamental for RF design and the target we have always said it’s the second half of the year, we would like to have products coming out to win in the fourth quarter, regardless of we have a 100% capacity utilization or not. I feel comfortable that is going to be between 80%, is a good number when you say you start building up your capacity. That is essential to give confidence to customers that on a ramp up we will be able to supply the products that they need when they needed. And so I will expect to leave 2010 with shipments from win. Long-term strategic partnerships always said that you will reserve a percentage of your demand for the external partner. So I will expect that will be single-digit 10% on a minimum.

Patrick Newton – Stifel Nicolaus

Okay, fair enough, that’s very helpful, Mario. And then one for Tom. Once again very impressive gross margin results. By my calculation this is three consecutive quarters with a contribution margin well over 60%. I was just wondering if you could walk us through how we should look at gross margin through the remainder of the year. I think in the past you talked perhaps about a 50% contribution margin and has that changed at all, do you expect to see this continued strength, your utilization keeps upticking? And then perhaps if you could just tell us what your utilization was in the quarter?

Tom Shields

Sure, Patrick. You’re right, the three quarters we’ve been well over especially 75 and to your point for modeling purposes, yes, we continue to model 50%, gross margin expansion on the sales revenue increase, certainly, as broadband increases in the out quarters, you have higher leverage, about 50 gross margin, we do expect that as your fab continues to ramp in the out quarters you’re going to see opportunities for gross margin expansion. So we have certainly factored in all of elements to say at least at a minimum 50% is the safe that and clearly, other opportunities hopeful will give us the opportunity to high gross margin. But for now, 50% is the norm. Our utilization rate for the first quarter was in a high 50s, slightly up from the fourth quarter.

Patrick Newton – Stifel Nicolaus

All right, thank you very much. Well done, congratulations.

Mario Rivas

Thank you.

Operator

Our next question is from the line of Steve Ferranti. Please go ahead with your question.

Steve Ferranti – Stephens, Inc.

Hi, guys. Nice job on the results and congratulation on the pro forma profitability milestones. It’s great.

Tom Shields

Thank you, Steve.

Steve Ferranti – Stephens, Inc.

Just wanted to focus in a little bit on the cable business. It’s good to see the infrastructure side starting to pick up again. Can you talk a little bit about it sounded like in your script you had suggested that you were expecting some sustainability to the pick up there? Could you talk a little bit more in color about what’s you’re seeing out there?

Mario Rivas

Yes, in general, I have always stated that specifically, the cable part of the business is very much related to economic growth and housing starts and consumer confidence. It was encouraging to see for the first time new housing starts to be in the positive side. Now that we sold maybe a couple of weeks ago. Because that requires development of infrastructure. Also we spoke about cable infrastructure in developing countries that that will help us get ahead. In other area, once you see consumer confidence return you will see upgrades on cable modems as well as set-top boxes which we will feel that particular part of the business. So we are cautious on the model inside, we do not have the same growth rates that we are showing wireless but we think it’s sustainable in 2010.

Steve Ferranti – Stephens, Inc.

Okay, and then the slide downtick we saw on the set-top box side, is that just normal seasonality, the March quarter you expect that to be bound as we go forward?

Tom Shields

This is Tom. Yes, I would say this is somewhat of seasonality, because in the fourth quarter, set-top box hit 6.8 million, up from 4 million from Q3. So we do view that as more seasonal, if anything out, and we do expect further increases throughout the year.

Steve Ferranti – Stephens, Inc.

Okay, great. And last one for me. The dual band CDMA opportunity that you mentioned as one of the three new product drivers you had. Is that for 2G applications or is that more of an EVDO type of application, that this product is addressing?

Mario Rivas

Say it again, EVDO or?

Steve Ferranti – Stephens, Inc.

Or is it a 2G sort of CDMA 2000?

Mario Rivas

No, it is capable of doing EVDO. Our device can do EVDO.

Steve Ferranti – Stephens, Inc.

Okay. That’s great. Congrats again on the results and thanks for taking the questions.

Tom Shields

We appreciate it.

Operator

Our next question is from the line of Aalok Shah with D.A. Davidson. Please go ahead with your question.

Aalok Shah – D.A. Davidson

Hi, guys. Tom, quick question. I know you said this was wireless LAN in the quarter. How much was it down sequentially?

Tom Shields

Wireless LAN was 800,000 and it was down 4.9 million from Q4.

Aalok Shah – D.A. Davidson

Okay. And when you kind of thinking back now I mean wireless LAN with the Intel in China business kind of going up. So should we just expect that the business is kind of be at this run rate now going forward?

Tom Shields

I would say, yes. There are opportunities we’re seeing in other notebook applications. In addition, as we’ve said previously, other quarters that we’ re certainly chasing and look forward to opportunities in the smartphone arena. But at the present time that level of revenue is probably where will sit until the back half of the year.

Aalok Shah – D.A. Davidson

Okay. And then I am curious on the set-top box that it was down this quarter. I know Q4 was pretty strong, but what are you thinking about now as you go into Q2, Q3 and then Q4. Should we expect it to be kind of a gradual improvement throughout the rest of the year? How you guys thinking about that business?

Tom Shields

Yes, as Mario commented that the cable infrastructure by far is showing some robust growth on the set-top box. We do anticipate it growing, but not to the degree of cable infrastructure. What we’re seeing mostly is the after splitters that we sell into both Motorola and Cisco and that through distribution is doing very, very well. We’re seeing some of the downtick that in Q1, it was primarily coming from the tuner side, but we see some opportunities in the back half with each of our customers for opportunities in set-top box. But it will be less in the cable infrastructure development.

Aalok Shah – D.A. Davidson

And then Mario, one quick one. In terms of your strength in TD-SCDMA I know you guys have done well there, but is there a way to think about it, are you getting some reference design wins through somebody like Spectrum or somebody along those lines or is it just genuinely being pulled through the OEM and we shouldn’t really be thinking of reference designs in that case.

Mario Rivas

We do have relationship with reference design. It is that pulled from the OEM. And we did extremely well, we reacted in very short cycles to upside demand for TD-SCDMA and we captured this socket. So we’re quite happy with it.

Aalok Shah – D.A. Davidson

And where are you now with Media Tech? Have you guys started to build the further relationship with Media Tech now as well?

Mario Rivas

As they returning to their 3G side of the market it’s obvious opportunity for us. And we have some conversations with them, obviously, incorporated in new power amplifier into a reference design, (inaudible) overnight.

Aalok Shah – D.A. Davidson

Great, thank you very much. Congratulations.

Mario Rivas

Thank you.

Operator

Our next question is from the line of Todd Koffman with Raymond James. Please go ahead with your question.

Todd Koffman – Raymond James

Thank you very much. I wanted to ask you about the progress you’ve made in the wireless segment, particularly, as it relates to your customer exposure. In the last four quarters or five quarters plus you look at the guidance this business has grown dramatically. It’s almost doubled actually if you incorporate your guidance. And you pulled out Samsung now as greater than 10%, I was wondering are your other top customers growing reasonably well or have you got name and just really sort of run on the heels of Samsung since you don’t give a lot of very specific customer dependent?

Mario Rivas

What I have learned from three decades in the industry is that you need to manage your future yourself. Because sometimes customer makes adjustments, right. I have stated Samsung is the second largest supplier of handsets in the world. Therefore, for us a great deal of runway for us and we’re happy to see them continue to progress on the growth. At the same time we are quite pleased with the consistency of the likes of LTE and to have somebody that those are well as RIM, in the portfolio of customers.

So I think we have a nicely balanced device between customers what we have runway and customers that are doing very well on their own accord, gaining market share. I stated in the opening remarks that it’s not just our design wins, it’s design wins with people that are growing and it’s quite nice to see. I can tell you Samsung is not our largest customer today.

Todd Koffman – Raymond James

Thank you very much. Good luck.

Mario Rivas

Thank you.

Operator

(Operator instructions) Our next question comes from the line of Mike Alexander with Charter Equity. Please go ahead with your question.

Mike Alexander – Charter Equity

Hi. I wanted to ask about ZTE, it’s been a couple quarters since they’ve been on the customer list. And I know that they are actually growing quite well in the handsets. I wonder where you stand with them.

Mario Rivas

ZTE is a good customer for us. It continues to grow its high single-digit. They have not just broken into a 10% number. But they continue to be one of the four engines for all in the wireless space.

Mike Alexander – Charter Equity

And is that just handset business or do you also have some infrastructure business with them as well?

Mario Rivas

We do not have infrastructure, it’s handset, and data USB devices.

Mike Alexander – Charter Equity

And then in terms of WiMAX, I wondered how sustainable the revenue trend is there obviously clear wireless is being a lot of build out. Are you focused just on clear wire or there were worldwide WiMAX deployments that you are also involved in?

Mario Rivas

Yes, worldwide. A lot of our uptake is going to be Korea, were also Japan. There is customers outside of the United States in this regard.

Mike Alexander – Charter Equity

I know you also involved in WiMAX devices and dongles or is the superior infrastructure?

Mario Rivas

We’ve also in dongles. You’ve seen a Sprint WiMAX combination with EVDO and it has a part.

Mike Alexander – Charter Equity

Great. Congratulations. Thank you.

Mario Rivas

Thank you for sharing.

Operator

Our next question is from the line of Cameron White [ph] with Jay A. Fishman Limited. Please go ahead with your question.

Cameron White – Jay A. Fishman Limited

Hey, thanks, guys. Just a couple of questions. First of all, in light of your improving cycle times or improved cycle times what do you foresee for your working capital needs going forward?

Tom Shields

This is Tom. We do a great job relative to managing working capital. There is no doubt as a result of the level of inventory that we have relative to the opportunities and with our customers both in Q2 and hopefully the second half. We are always looking at building safety stock. So there could be the need where inventory may rise in Q2. AR is well in hand, we’re very pleased relative to our payments that we receive from our customers. So typically as you get revenue growth and depending upon the linearity of the quarter both in revenue and the inventory build, you typically are going to fund working capital. However, I feel very strongly that the management of working capital was something that is not going to require a significant use of cash for the company.

Cameron White – Jay A. Fishman Limited

Okay, great. And so, I guess this is a follow-up to that. What level of cash are your customers require you guys to hold your balance sheet, do you foresee needing to raise capital to keep them happy that you have to improve product cycles?

Tom Shields

No, we’ve not made any plans or announcements relative to the needs to raise capital.

Mario Rivas

Yes and our customers really understand that we do not have to build another factory to get pass the 80 million a quarter place. So we have more than enough. We are quite pleased with our balance sheet I think relatively speaking we have the best balance sheet in the field. (inaudible) visits makes a point of telling of that.

Cameron White – Jay A. Fishman Limited

Great. Just one final question. And years passed and you mentioned GOBI and DOCSIS 3.0 as some of the emerging growth areas for your company. How those materialized relative to your expectations?

Mario Rivas

Yes, GOBI is a steady, but not mainstream kind of a device. And if you look at the Qualcomm conference call they have changed their model and licensed their technology for other people to adopt. It’s the strategic value for us because it allows us to maintain a close relationship with Qualcomm and the future plans. GOBI 1K, 2K and now 3K. Even in a small volume having five 3G power amplifiers makes it for a very nice, very nice product for us.

On DOCSIS 3.0, the biggest problem has been the slowdown in the economy, slowdown in deployment of the modem. So it definitely will not meet our expectations. It’s a slow and steady and it’s my hope that there is more deployment of infrastructure and then there is more demand for bandwidth with devices like the iPod, that is a multimedia machine that then customers will see the value of upgrading to DOCSIS 3.0.

Cameron White – Jay A. Fishman Limited

Great, thanks.

Operator

Our next question is from the line of Richard Shannon with Northland Securities. Please go ahead with your question.

Richard Shannon – Northland Securities

Hi, guys. Congratulations on the very nice numbers and guidance. I guess my first question is I apologize if this is repeated, I jump in the call a little bit late, but curious about the pricing trend you’re seeing for demands from your customers. I know you talked about general pricing download path of 8% to 10% per year on average. Are you seeing any difference from your customers here over the last three months?

Mario Rivas

Not, as I said not at the moment, it’s difficult to predict the second half of the year obviously, because we don’t know what the dynamics are going to be. The point I made was it seems like the entire industry is moving strongly to growth. And a lot of us make some adjustments to capacity, not in terms of equipment, but in terms of manpower. And we are now scrambling to put more manpower on the line. So I’d say that could be a positive but then again there is competition, so we stick by the 8% to 10%.

Richard Shannon – Northland Securities

Okay, fair enough. And my second question is on the content of 3G phones as your customers are projecting how far over this year and how many bands that they might be putting in their phones. Are you seeing a continued increase here in 2010 in terms of overall RF content, particularly in 3G?

Mario Rivas

Yes, I think, you’re going to see the average jump from 1.2 to 1.3 on the average to close to 2 on the average. Our top-line devices will have three power amplifiers for wideband CDMA, plus the quad device for H frequency bands as a back up, right. In a market that we serve we do very well that its data-intensive like smartphones I do expect a number to increase from 2009 to 2010.

Richard Shannon – Northland Securities

Any thoughts on beyond 2010 are you hearing anything along those lines?

Mario Rivas

Well, we always looked at wideband CDMA was going to standardize everything and it was going to make it easier, quite frankly, the number of bands will continue to grow, and more people need more capacity so they add other brands. I think the carriers will be very selective on what frequency they deploy, but if I say, band 2, band 5, what cost I am talking about, if I say band 1, band 8, you also know who I am talking about, so, on the average sale have at least two bands to cover.

Richard Shannon – Northland Securities

Okay, great. My last question is regarding WiFi and Smartphones kind of want to get an update there. What you are seeing especially relative to your expectations a quarter ago in terms of the attach rates and how fast it’s going to trend throughout this year?

Mario Rivas

Yes, I will separate the WiFi attach rate with an external power amplifier on the WiFi. I think that there is no question in my mind that the WIFI attachment rate or smartphones will totally be large. I am saying in two years I will be surprised if it’s not a 100%, right. Having said that the external power amplifier for us will be 5 gigahertz type of device and that’s a little bit more difficult to predict, but the attach rate will be I will expect it to be 10% to 15% of the attach rate.

Richard Shannon – Northland Securities

Okay, great, appreciate the update then once again.

Mario Rivas

Right.

Operator

Our next question is from the line of Mike Burton with FBN Securities. Please go ahead with your question sir.

Mike Burton – FBN Securities

Hey, guys, and congratulations on the good numbers and guidance. Within wireless can you break up for us or a ballpark percent of sale by wireless interface standard?

Tom Shields

Yes, Mike, this is Tom. It’s all predominantly 3G, which is, for the most part 95% wideband CDMA.

Mike Burton – FBN Securities

Okay and the other 5 would be we got CD (inaudible)?

Mario Rivas

Yes.

Mike Burton – FBN Securities

And then you guys obviously have a great relationship with Qualcomm, but can you talk about some of the progress you made with MTK and ST? Thanks.

Mario Rivas

Yes, we have strategic conversations with ST-Ericsson. We have share product road maps for the next three years which is a great place to start, right, and we have a dedicated team to supply those particular area. So I feel very strong about that and look further ahead and say the conversation with Mediapeg [ph] which we just started talking to them and they are attracted to by our good technology.

Mike Burton – FBN Securities

Without being on references I know you are already started to see some traction through WPG or into a lot of media tech-based phones, is that like 10% of sales at this point?

Mario Rivas

I cannot answer that because I don’t know exactly the World Peace deliveries are from. In some cases we are in reference design that use black phones where we are “not certified” right, so it’s our parts are well thought out because of their efficiency and linearity, but I cannot give you a percentage of how much of World Peace that is now a 10% customer is actually going in that direction.

Mike Burton – FBN Securities

Okay, well, congrats, thanks again guys.

Mario Rivas

Thank you.

Operator

Our next question is a follow-up from the line of Anthony Stoss with Craig-Hallum. Please go ahead with your question sir

Anthony Stoss – Craig-Hallum

Thanks, again. Tom if you won’t mind talking about if the quarter was linear, which our view on kind of Q2 might hold and inventory balance is kept flat, any thoughts on that with an expanding revenue where your internal levels make up?

Tom Shields

Yes, I think Q2 will take the same pattern in revenue shipments as Q1. So typically the third month is slightly higher than the first two months. So I don’t think that’s going to change much. Relative to inventory we are in the need of building safety stock for certain lead times by certain customers. So even though I would expect that perhaps as a result of the growing revenue that AR and inventory might grow in Q2 I feel very good relative to the cash balance that we anticipate to exit the quarter. So the management of both working capital components are very strong. So I feel very good about where we are going to end up, particularly, the cash balance in Q2 as well.

Anthony Stoss – Craig-Hallum

Okay. Mario, you mentioned ZTE love to hear your views on Huawei and HTC and I know from time to time you talked about quoting both those two as customers. Thanks.

Mario Rivas

Yes, absolutely, we’ve gotten maybe trying to get into the good graces of both HTC and Huawei. It took longer than in some other locations, even problems that we had in 2008. So we had small increases with both of them in customers, but really, the goal is that going forward later this year and going into 2011 there should be strong engines of growth for us. Now we’ve stated HTC, Huawei and Nokia as our objectives, and Nokia takes longer than others.

Tom Shields

Yes, Tony, this is Tom. We’re seeing some good traction relative to design win opportunities with both HTC and Huawei. I think they are now and significant uptick in visits between both companies so we feel pretty good that they will be covering a larger component of our portfolio going forward.

Anthony Stoss – Craig-Hallum

Alright, thank you.

Operator

Our next question is also a follow-up from the line of Todd Koffman with Raymond James. Please go ahead with your question sir

Todd Koffman – Raymond James

Quick follow up. I know it’s little early but now when you look out into the second half given lead times, your design wins and a number of factors in your business, how you think the second half of the industry is likely to shape up on the wireless side?

Mario Rivas

Yes, overall, I will say that it’s very strong. I think 2010 will be strong for the wireless industry stronger than 2009. I mean 2009 the wireless handsets actually bucked the trend than all the other areas where you have growth. So I am very optimistic about the second half. I was very happy to read economy stating that the recovery is stronger than expected and the worry is 3% per year in economic growth, right. But as an overall remark I expect the industry to do well this year.

Tom Shields

Hey, Todd, this is Tom. What I like and my observation is the fact that I too observe that the handset market is growing very nicely in smartphones and also you have the component potentially of wireless LAN growth. But in a growing market what’s happening with our particular business is in fact there are customers are growing and therefore, taking increased share. At the same time we believe we are taking increased share of their unit volume. So we perhaps there are three things that are going in our favor, an increased wireless handset market, increase in PA content, therefore the tan of PAs is increasing, our customer share of the market is increasing, and therefore we are also increasing our share across the customer base.

Todd Koffman – Raymond James

Thank you for the follow-up. Good luck.

Tom Shields

Thank you.

Mario Rivas

Thank you.

Operator

And our next question is from the line of Shashi Rao with Credit Suisse. Please go ahead with your question sir. Mr. Rao, your line is open. Please go ahead with your question.

Shashi Rao – Credit Suisse

I apologize, I was on mute. Just a question on the weak PCW LAN revenues. Recent trends suggest that the PC notebook mix has been strengthening; notebooks are stabilizing or even decreasing. Could this reverse some of the decline that you’ve been seeing in PCW LAN?

Tom Shields

No, there is a change in the dynamics of the PC world that the notebooks actually did it, right. There is a (inaudible) solution in where we participated very strongly was replaced by much simpler devices that notebooks used. And we seem is no longer bundled. You don’t see the same demand. The value of the opportunity is lower, right. And we have stated for fourth quarters in a row that technically, we don’t have a problem supplying the device, it has to be a win-win for both our customer and ourselves. And those represent a bit use of our wafers.

Shashi Rao – Credit Suisse

Got it, and also you look out ahead do you think like Smartphone WiFi or other new devices such as tablets and other converge devices could eventually make up for the loss in these revenues?

Mario Rivas

If you are asking me my model includes a large amount of WiFi for 2010, the answer is no. Could it happen in the future as we get faster speed and higher frequencies? Absolutely.

Shashi Rao – Credit Suisse

Okay, got it. And Tom, one last question. Could you comment on how inventory levels that your customers trended during the quarter and did they restock inventory, are they still operating at pretty lean levels?

Tom Shields

Well, my observation, I’m very pleased that the order tracking continued to increase throughout the quarter which led to our 12% sequential guidance for Q2. So we are pretty pleased that we are seeing increase in demand across the customer base. So that would tell me at least from a surface that there’s a not a lot of inventory out there

Shashi Rao – Credit Suisse

Cool, thanks.

Mario Rivas

You bet.

Operator

And at this time, we have no further questions. Mr. Rivas, do you have any final remarks you would like to make?

Mario Rivas

Yes, thank you, operator. Our Q1 revenue results and second quarter guidance set us on a solid path of continued growth in 2010. In addition to the positive strength in wireless, we’re also seeing positive trends in cable related to infrastructure build outs. Many of our new products are being very well received. With the expected achievement of non-GAAP breakeven much sooner than previously anticipated, we remain focus on driving future revenue growth that can be leveraged for additional improvement to the achievement of bottom-line non-GAAP profitability. Thank you for your time and support and have a good night.

Operator

Ladies and gentlemen, this does conclude the ANADIGICS first quarter earnings conference call. We thank you for your participation. You may now disconnect.

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